Wed Aug 12 07:00:00 CDT 2015

Consensus Actual Previous
Change Y/Y 5.07% 3.78% 5.40%

Consumer price inflation eased in July to 2.83, down from 5.40 percent in June. The easing in the headline index reflected a decline in the urban rate to 2.94 from 4.55 percent. At the same time, the rural rate declined to 4.44 percent from 6.07 percent in June.

Within the overall basket food prices also eased to an annual rate of 2.89 from 5.48 percent. Clothing and footwear were up 5.88 percent, down from a 6.34 percent rate while housing recorded 4.44 percent and fuel and light 5.36 percent.

July's easing in inflation is likely to ramp up speculation about a fourth RBI repo cut later in the year. That said, the easing in food inflation will be something the RBI takes particular notice and developments here will be watched very closely over coming months during the key monsoon period.

Consumer Price Indexes (CPI) measure changes over time in general level of prices of goods and services that households acquire for the purpose of consumption. The data are released for previous month and are not seasonally adjusted.

CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as deflators in the national accounts. CPI is also used for indexing dearness allowance to employees for increase in prices. CPI is therefore considered as one of the most important economic indicators.

CPI numbers presently compiled and released at national level for India reflect the fluctuations in retail prices pertaining to specific segments of population in the country -- industrial workers, agricultural labourers and rural labourers. These indexes do not encompass all the segments of the population in the country and as such do not reflect true picture of the price behavior in the country. To overcome the above, the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation has started compiling new series of CPI for the entire urban population or CPI (Urban) and CPI for the entire rural population or CPI (Rural), which reflect the changes in the price levels of various goods and services consumed by the urban and rural population.